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API-Based SaaS: Definition, Benefits & Challenges

by Lea LeBlanc. Last updated on July 17, 2023

Are you an aspiring SaaS founder? If so, you may be overwhelmed with your options, including API-based SaaS.

In this guide, we’ll help you make sense of it all by discussing what API-based SaaS is, its benefits, and its challenges. Armed with this information, you can decide the best way to move forward with your startup.

What Is an Application Programming Interface (API)?

API is a set of protocols, standards, and tools that allow two or more software applications to connect and share specific data. In simpler terms, APIs serve as a bridge that connects different software applications. Via the bridge, connected software can seamlessly integrate to send data back and forth.

For example, you can make an HR app with SaaS API integration. Companies using the software can connect accounting software to it to manage employee payroll, benefits, and more. Adding an API to your software will increase its functionality, making it more attractive to users. Also, APIs boost user experience by eliminating the need to enter data manually or switch between apps.

Example: The Baremetrics Analytics API

To paint a clearer picture of SaaS API integration, let’s look at how our API-based SaaS software works. Baremetrics is a SaaS metrics collection and analysis tool. Thanks to its API feature, you can connect our tool to other software your company uses. Doing so authorizes Baremetrics to connect and receive specific data from these other platforms.

For instance, connecting Baremetrics to your payment provider will collect data regarding payments. Baremetrics can then use the data to provide insights into your monthly recurring revenue, conversion rate, and more. You can also export metrics and other data from Baremetrics to collaboration or presentation tools.

Alternatively, connect Baremetrics to your customer relationship management (CRM) tool to import customer information from the CRM. Baremetrics can analyze the data to automatically provide reports regarding your annual recurring revenue, customer lifetime value, and more.

What Is API-Based SaaS?

API-based SaaS is a software application hosted in the cloud. Users and other programs can access the software’s features, data, and functions via an API instead of a user interface. For instance, instead of logging into your payment provider or CRM to view data, you can use Baremetrics to access the data. However, this will only work if you’ve already integrated the apps with Baremetrics via its API.

API-based SaaS apps have recently become more popular because businesses can connect third-party services and applications with them. The integration allows users to seamlessly control different apps or access data from multiple apps in one location.

In summary, SaaS API integration can enhance the functionality of SaaS applications by enabling various apps to integrate and work together seamlessly. End users can build custom workflows by integrating the specific apps they need to fulfill their goals. This customizability will improve your SaaS app’s functionality, leading to more productive and efficient end users.

How Does SaaS API Integration Work?

SaaS API integration works by connecting different software applications via an API so they can send data back and forth. The API provides a set of rules and protocols that allow each application to interact with the other and exchange specific data. The data exchange between the apps eliminates the need for end users to enter data manually into multiple systems.

For example, you can connect Shopify to Baremetrics via our pre-built integration. You only need to create an API client in your Shopify Partners Dashboard and enter the appropriate credentials to get started.

Once the connection is up and running, you can view real-time insights from your Shopify account in your Baremetrics dashboard. Other popular apps you can connect to Baremetrics include Stripe, Slack, Braintree, Recurly, and more. 

The Benefits of API-Based SaaS

Do you need more convincing that building an API-based SaaS product is the way to go? If so, here are the benefits of API-based SaaS software.

Improves the User Experience

API-based apps improve the user experience by making it easier for users to import and export the data they need to make the most of your app. Also, users can customize their workflow by integrating specific apps to complete tasks more effectively and with less hassle.

Eliminating the need to switch between apps to access specific data and allowing users to access multiple apps from a single location enhances the user experience. The better the user experience of your SaaS software, the more attractive your app will be to target users. 

An enhanced experience also makes your SaaS product more engaging, speeding up adoption and facilitating your onboarding process.

Simplifies Development

Having an API-based app facilitates product development. Instead of building features from scratch, developers can simply integrate your software with other apps that already have the desired features.

Developers will use APIs to integrate your SaaS product with the apps that have the needed functionalities pre-built and ready to use. Doing so speeds up the development process and frees up resources, allowing developers to focus on perfecting your app’s core features. 

For example, developers can integrate Facebook or Google authentication into your app instead of building an authentication page from scratch.

Increases Accessibility

Users can access API-based SaaS software via an internet-connected web browser or mobile app. If using a web browser, the user doesn’t need to install the software. The convenient access simplifies remote working and real-time collaboration among teams spread across the globe. 

It also promotes productivity by not limiting users to accessing the software from specific devices or locations. 

Flexible and Scalable 

The flexibility of API-based SaaS software allows you to quickly and easily update the software to improve its performance. Also, you can update your software in the background without disrupting user activities or existing integrations.

Even better, API-based SaaS software is highly scalable due to cloud hosting. The scalability means you can enroll thousands of new users without performance issues arising. You also don’t need to change the underlying software architecture.

The Challenges of API-Based SaaS

While API-based SaaS software has several benefits, it’s not perfect. Let’s go over some of the challenges faced by SaaS companies that build API-based apps.


Your SaaS product’s price has to be competitive, sustainable, and fair. However, pricing can be challenging because every API-based SaaS product typically has multiple plans. Each plan needs its own price because it’s a different version of your product. Figuring out how much to charge for each plan without scaring away customers or undercharging can be tricky.

Fortunately, you can choose an ideal SaaS pricing model by testing different plans at different prices. Optimize your price by increasing the price in each test. A drop in demand during your tests means you’ve reached the ceiling of how much users will pay for that version of your product.


API-based SaaS products face unique security challenges, such as the risk of a security breach if users integrate with a compromised third-party service. Also, SaaS products are prime targets for cybercriminals looking to steal sensitive user data. Such criminals usually attempt to exploit vulnerabilities in the API to gain access to sensitive data.

You can secure your SaaS software by implementing strong authentication and authorization mechanisms. Other security measures you can take include managing API keys properly and securing third-party integrations.

Integration Issues

The upside of SaaS API integration is the option to integrate different apps. However, since the technology and standards used to build apps can differ, users may experience trouble integrating specific software with your app product. The compatibility issues can lead to data inconsistencies and other issues.

Improve Startup Performance With Baremetrics

Now that you know the benefits of SaaS API integration, which API-based SaaS product do you plan to build? Regardless of the software you choose to develop, ensure it’s successful with Baremetrics.

Lea LeBlanc

Lea is passionate about impactful businesses, good writing, and the stories founders have to tell. When she’s not writing about SaaS topics, you can find her trying new recipes in her tiny Tokyo kitchen.